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General discussion

Ouch - Poor Sony (not really)

Feb 20, 2006 6:25AM PST

This article was pretty interesting:

http://today.reuters.com/business/newsArticle.aspx?type=technology&storyID=nT157501

To summarize, Merrill Lynch downgraded Sony from "neutral" to "sell" because they believe early production cost for the PS3 could be as high as $900 per box. That's a big loss per console to absorb EVEN if they sell it for as high as $500 (an analyst thinks they can sell it for no higher than $420 per console).

It may also be delayed as Sony must wait for industry consortiums to finalize spces on some of the technology in it.

-Kevin S.

Discussion is locked

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Oh darn
Feb 20, 2006 9:13AM PST

Now I might have to consider not buying a PS3 again, after already knowing that it would cost too much and come from Sony, a company towards the top of my Hate List.

Waiting for the true Next-Gen Revolution,
-Ryan

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Its odd
Feb 20, 2006 10:31AM PST

You can buy a Sony Vaio (Desktop) for less than $900. I know you can't play ALL the games on the desktop, but, still, to me, it just seems crazy. But then, I'm not a gamer.

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I'm a gamer... and...
Feb 20, 2006 11:00AM PST

Well let me put it this way:

Cutting-edge PC: $3,000+
Cutting-edge Console: ~$400-600


So really a console provides good value.

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This is why it costs so much
Feb 20, 2006 11:32AM PST

It is packed with bleeding edge technology and bleeding edge costs money. The cell processor alone is futuristic. The blu-ray technology uses a blue-violet laser that only recently became small enough for consumer products. It has super fast RAM and VRAM, Bluetooth, Gigabit ethernet and WiFi 802.11g (Mac users call it Airport).

Add in the high-speed buses and other bits and parts needed to make all that talk-nice to each other and the user and you see why it costs so much.

-Kevin S.

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Where did it all go wrong? (I hope you enjoy reading)
Feb 20, 2006 12:02PM PST

You know that when the Playstation 3 was first proposed by its designers, there was no way the parts were going to add up to any $900. So where did it all go wrong and why would a company be willing to eat several hundred dollars per unit to get it out the door?

Consider that over 91 million PS2s have been sold since its introduction and then try and translate numbers like that into the PS3's loss per unit. Granted, if they pump out 91 million PS3s, the cost per unit will come way down. But will it always be sold at a loss?

If the loss per console is a conservative $400 for the first 10 million and then, say $100 for the other 40 million (assuming it will never sell 91 million like its predecessor) that's a loss to Sony of about $8 BILLION on the console alone. They will have to sell a crapload of games to ever make that kind of money back. This task, in a world that now has a very real competitor in the form of the Xbox 360, and let's not forget Nintendo is still out there.

The PS3 is a huge gamble for Sony and this gamble is based upon a market that either stays the same or continues to grow. What if it gets fractured even further? More people than ever have home computers so the appeal of a console becomes less and less. I could easily see the console market shrinking and not growing and this PS3 could ultimately send Sony into a nosedive.

-Kevin S.

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What is the average amount of money spent on games though?
Feb 20, 2006 2:03PM PST

I know that my N64 has at least 10 or 15 games (@ 60 bucks a piece, $600-$900,) my GameCube has a solid 5-10 (@ ~50 bucks a piece, $50-100$)


So I'm assuming the PS3 games will be ~60 bucks. Then assuming they are losing 400 a console, they will need consumers to buy 7 games to make up the difference. If these are third party games I imagine the number would be much higher depending on how much liscensing cash they get from 3rd party games.


If they can get it down to 100 dollars of loss on a console then they'll only need 2 first party games or a still reasonable number of third parties stuff.

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Well, it's not supposed to be just a gaming rig.
Feb 20, 2006 4:51PM PST

It seemed to me that Sony had a big-picture vision for the PS3: make it the centerpiece for home media delivery, something that other platforms like Windows Media Center XP-based PCs so far have failed to deliver on. Gaming is only part of the equation, albeit a big part. Frankly, no one really has to have BluRay just for game delivery. But also no one outside of the BluRay consortium is really sure if they need BluRay AT ALL, considering the confusion that's already happening with the hi-def disc market.

Given that, the comments from SCEA exec Tetsuhiko Yasuda sort of makes sense. He states that the PS3 and the Xbox 360 aren't competitors, which at first blush seems as if it's a slam on the 360. But taken from the standpoint of what Sony intends for the PS3, Yashda's statements make sense in that the 360's role is primarily as a next-gen gaming rig; everything else is definitely secondary, if that. Sony's grand vision for the PS3 certainly still features gaming at the core, but the multimedia component sets it apart from the 360 (or so Sony hopes).

Personally, I'd be more inclined to buy into the success of the latter scenario if the PS3 was a product from a certain Cupertino company. Woe is Sony that the iPod exists and that from a practical standpoint Redmond isn't their vaunted PS3's only "competition". Sony is banking on the added bonus of BluRay content delivery, but somehow I don't think the typical middle-class family will buy into everyone sharing time on a single central machine, even if BluRay wins out over HD-DVD. The more I try to reason WHY Sony was so adamant over including BluRay, besides jump-starting THEIR chosen format (assuming everyone in the consortium finally get together on the same page), the less I think its inclusion is really a good thing for the PS3.

If nothing else, statements like Yasuda's set the groundwork for a pricing structure that's more expensive than the price point where MSFT has the 360 at. "It does more, so its price should be more", or something like that. Whether or not the Sony faithful buy into that is another matter. If indeed the PS3 initally costs $900 a pop to build (Merrill Lynch's initial price for the Cell CPU seems light to me for something that's supposed to blow away the very best that AMD and Intel currently make and $ell, but what do I, AMD and Intel know?), then that's a LOT of faith that Sony is going to be asking of their fanbase, even IF Sony is willing to take a major bath on each unit sold.

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I try to stay away from the opinions and rants ...
Feb 20, 2006 1:42PM PST

... of people, because no one knows what's going on at Sony, or what they have planned, whether it be the brokers, game sites, or that dude who swears he has a "friend of a friend who works at so-and-so."

I'll make my decision once the console comes out.